ROJAS v. MAGLANA (PARAS, J.

|December 10,  On February 4, 1957, Rojas withdrew his

1990) equipment from the partnership for use by
CMS
FACTS:  On March 17, 1957, Maglana wrote to Rojas
reminding him of his obligation to contribute
 On January 14, 1995, Maglana and Rojas (in cash or equipment).
executed their articles of partnership called
 Rojas replied that he cannot do the same and
“Eastcoast Development Enterprises(EDE).
he will not work for EDE anymore.
Its existence is with an indefinite term.
 So Maglana told Rojas that his share will only
 Its purpose is to apply or secure timber and/or
be 20% of the profits from 1957 -1957.
minor forests products licenses and
 Rojas took funds from the partnership more
concessions over public and private forest
than his contribution. Thus, On February 21,
lands and to operate, develop and promote
1961, Maglana notified Rojas that he
such forests rights and concessions.
dissolved EDE.
 Maglana shall manage the business affairs,
 On April 7, 1961, Rojas filed before the RTC
including marketing, handling of cash, and is
an action for (1) recovery of properties (2)
authorized to sign all paper and instruments
accounting, (3) receivership (4) damages.
relating to the partnership. While Rojas shall
Receivership was denied.
be the logging superintendent, managing the
 Maglana filed a motion to dismiss, but was
logging operations. As to profits and losses, it
denied.
was 50-50.
 The judge appointed commissioners to
 Subsequently, the partnership applied for a
examine the account of EDE.
timber concession covering the area in Davao
 Commissioners submitted the report
with the Bureau of Forestry. The same was
compiled in 3 volumes. The RTC approved
renewed under the name EDE.
such report.
 On January 14, 1995 to April 30, 1956, EDE
 Rojas filed MR against the approval of the
did not operate.
report by commissioners. However, it was
 Because of some difficulties in the
denied.
management, Rojas and Maglana admitted
 Stipulation of issues to be resolved: (1) what
Pahamotang as industrial partner.
is the nature of the partnership between Rojas
 The second partnership was not registered
and Maglana; (2) sharing basis; (3) ownership
and its terms, aside from the addition of (1)
of properties bought by Maglana in his wife’s
the holding and securing and securing
name; (4) damages suffered and who should
renewal of timber license and (2) its existence
be liable ; (5) legal effect of unilateral notice
limited to 30 years, everything else is the
of dissolution by Maglana on February 23,
same.
1961.
 The 2nd partnership started its operation in
 RTC ruled dismissing the complaint filed by
May 1956. It was able to derive income from
Rojas: (1) partnership was de facto and at will;
the proceeds of the logs in the amount of
 (2) the basis is from 1955-1956 the verbal
P643,633.07.
agreement, from 1957 -1959 80% to Maglana
 On October 25, 1956, Pahamotang sold his
20% to Rojas, from 1960-dissolution
interest to Rojas and Maglana thru a
(February 23,1961) from the actual
conditional sale amounting to P31,501.12 and
contribution of the parties.
for the payment of the loan secured by him in
 (3) no evidence that it was acquired using
favor of the partnership. It was further agreed
EDE’s funds, thus, should not belong to EDE.
that the second partnership be dissolved.
 (4) neither parties were entitled to damages.
 The operation was continued by the two
without any agreement or reconstitution of the  (5) unilateral act of Maglana dissolved the
first agreement. partnership.
 On January 28, 1957, Rojas entered into a  In addition: (6) the canteen does not belong to
management contract with CMS estate, EDE; (7) the sale of forest concession by
abandoning EDE. Maglana is valid and be considered as part of
Maglana’s contribution to EDE; (8) Rojas to
turn over to EDE the P69,000 he received
 from CMS estate; (9) Rojas to pay
P62,988.19, his personal indebtedness to
EDE. (10) P85,000 should be credited to
Maglana as his contribution to EDE being a
logging superintendent.
ISSUES: (1) What is the nature of the relationship
bet. Maglana and Rojas (2) WON Maglana can
unilaterally dissolve the EDE (3) WON Maglana is
liable for damages because of such withdrawal.
HELD:
(1) ROJAS AND MAGLANA ARE PARTNERS
UNDER THE 1ST PARTNERSHIP
AGREEMENT. It was not the intention of the
parties to dissolve the 1st partnership upon the
constitution of the 2nd which they called
“Additional Agreement”. Except for the
inclusion of an industrial partner, the latter’s
equal share in the profits, and the limited term
of the partnership, everything else were the
same. In addition, all subsequent renewals
were secured in favor of the first partnership.
The Court held that the first partnership was
amended, and the amendment was not even
registered. Even when the 2nd partnership
were in existence, the transactions were
executed under the first agreement that is
registered. NO OTHER RIGHTS AND
OBLIGATIONS accrued in the name of the
2nd partnership except in favor if Pahamotang
which was fully paid by the registered
partnership.
The 2nd partnership was dissolved by
common consent. The latter does not affect
the continued existence of the 1st. Maglana
even wrote a letter to Rojas asking for its
contributions and Rojas replied that he cannot
do the same, by which he recognized that
they are governed by the articles of
partnership duly constituted by them. Thus, it
cannot be considered neither as de fact nor a
partnership at will.
(2) YES. Under Art. 1830, par. 2, even if there is
an specified term, one partner can cause its
dissolution by expressly withdrawing even
before the expiration of the period, with or
without justifiable cause. If it be without
justifiable cause, then the withdrawing partner
can be held liable for damages but he cannot
be compelled to remain in the firm. His
withdrawal, decreasing the number of the
members, hence, dissolution. In the
dissolution, Maglana and Rojas are governed
by the articles of partnership they executed,
that is “all profits are to be divided share
and share alike.” But an accounting must
first be made.
Rojas, cannot be given any share in the
profits because he failed to comply with his
undertaking to contribute money or property.
Thus, he is considered as debtor of the
partnership for whatever he may have
undertaken to contribute thereto(Art. 1786)
(3) NO. Maglana was justified in the withdrawal
because (1) after Pahamotang withdraw,
Rojas entered into management contract with
CMS, the same business with their
partnership; (2) Rojas withdrew his
equipment, refused to contribute anything; (3)
Rojas abandoned the partnership and took
funds from it.
The Court affirmed all other aspects of
RTC’s decision.
MARJORIE TOCAO and WILLIAM T. BELO vs
COURT OF APPEALS AND NENITA A. ANAY
G.R. No. 127405 | October 4, 2000 | Ynares-
Santiago, J.
FACTS:
 Nenita A. Anay, a former marketing adviser of
Technolux in Bangkok met William T. Belo, the vice-
president for operations of Ultra Clean Water Purifier
 Belo introduced Anay to Marjorie Tocao, who
conveyed her desire to enter into a joint venture with
her for the importation and local distribution of
kitchen cook wares.
 Under the joint venture, Belo acted as capitalist,
Tocao as president and general manager, and Anay
as head of the marketing department (considering
her established relationship with West Bend
Company, a manufacturer of kitchen wares in
Wisconsin) and as vice-president for sales later on.
 Given their roles, Anay organized the administrative
staff and sales force while Tocao hired and fired
employees, determined commissions and/or
salaries of the employees, and assigned them to
different branches.
 The parties agreed that:
a. Belo’s name would not appear in any documents
concerning West Bend. Instead, Anay’s name would
be used in securing distributorship of cookware from
the same.
b. Anay would be entitled to: (1) 10% of the annual
enet profits; (2) overriding commission of 6% of the
overall weekly production; (3) 30% of the sales she
would make; and (4) 2% for her demonstration
services.
 The agreement, however, was not reduced to
writing. Belo assured that he was sincere,
dependable and honest.
 The cookware business took off successfully. They
operated under the name of Geminesse Enterprise,
a sole proprietorship registered in Tocao’s name.
Belo made good the monetary commitments to
Anay.
 Subsequently, Anay accepted an invitation of
Muencheberg of West Bend to the distributor/dealer
meeting Wisconsin and to the southwestern regional
convention in California. This is with the consent of
Tocao. In a letter to the U.S. Embassy, Tocao said
that Anay is the Vice President Sales Marketing and
a business partner of the company.
 On October 7, 1987, Belo signed a memo entitling
Anay to a 37% commission for her personal sales
upto December 1987. Such was apart from her 10%
share in the profits.
 However, on October 9, 1987, Anay learned that
Tocao signed a letter addressed that Anay was no
longer the vice-president of the Company.
 The following day, Anay received a note from Lina T.
Cruz, marketing manager, that Tocao barred her
from holding office and conducting demonstrations
in both Makati and Cubao offices.
 To demand her overriding commission for January
1988 (she received the same for the period until
December 1987) and the audit of the company to
determine her share in the net profits, Anay and her
lawyer wrote to Belo letters which were not
answered.
 As such, Anay filed a complaint for sum of money
with damages against Tocao and Belo and for audit
of the company from its inception until the time that
she was “illegally dismissed”.
 Tocao and Belo argued that:
a. The "alleged agreement" that was "neither
reduced in writing, nor ratified" was "either
unenforceable or void or inexistent."
b. Belo’s only role was to introduce Anay to Tocao.
Thus, there could not have been a partnership
among them. Anay, herself, admitted that the
company is a sole proprietorship of Tocao. The
company also "came into being" exactly a year
before the "alleged partnership" was formed.
c. Anay filed the complaint on account of "ill-will and
resentment" because Tocao did not allow her to act
like she owned the enterprise.
d. There were unreturned and unaccounted stocks
obtained by Anay.
e. Because she treated Anay as her "co-equal,"
Tocao received the same amounts of commissions
as her.
 It was denied that:
a. Anay was entitled to a share in the profit although
it was admitted that Anay is entitled to the other
monetary incentives (aside from that of net profit)
because of her expertise.
b. Belo contributed capital or received share in the
profits since he merely served as a guarantor of
Tocao, who was new in the business. Tocao got the
capital out of the sale of the sewing machines used
in her former garments business and from a
Singaporean friend-financier who loaned to her the
funds with interest.
(c) Belo participated in decision-making.
 RTC: In favor of Anay
a. There was indeed an "oral partnership agreement”
since: (1) there was an intention to create a
partnership; (2) a common fund was established,
and (3) there was a joint interest in the profits.
b. Belo’s claim that he was merely a "guarantor" has
no basis since there was no written evidence thereof
(Article 2055 of the Civil Code).
c. Belo’s acts of attending and/or presiding over
meetings of the company plus his issuance of the
memo demonstrated his involvement as a partner.
d. The payment of commissions did not preclude the
existence of the partnership since such practice is
often resorted to as an impetus to bigger sales
volume.
e. It did not matter that the agreement was not in
writing.
f. The fact that the Company was registered in
Tocao’s name is not determinative of whether or not
the business was managed and operated by a sole
proprietor or a partnership.
g. A partner who is excluded wrongfully from a
partnership is an innocent partner. Hence, the guilty
partner must give him his due upon the dissolution
of the partnership as well as damages or share in the
profits "realized from the appropriation of the
partnership business and goodwill." An innocent
partner thus possesses "pecuniary interest in every
existing contract that was incomplete and in the
trade name of the co-partnership and assets at the
time he was wrongfully expelled."
 CA: In favor of Anay
ISSUE: Whether or not a partnership was created
HELD: Yes, a partnership was created.
 To be considered a juridical personality, a
partnership must: (1) consist of two or more persons
who bind themselves to contribute money, property
or industry to a common fund; and (2) have am
intention to divide the profits among partners
themselves.
 It may be constituted in any form; a public instrument
is necessary only where immovable property or real
rights are contributed thereto. Since a contract of
partnership is consensual, an oral contract of
partnership is as good as a written one where no
immovable property or real rights are involved. The
fact that there appears to be no record in the SEC of
a public instrument did not cause the nullification of
the partnership.
 In the present case, Anay was an industrial partner
as she contributed her expertise. She was also the
managing partner. It was through her reputation with
West Bend that the partnership was able to open its
business and that the business was propelled to
financial success. Tocao herself admitted private
 respondent’s indispensable role in putting up the
business.
 Belo’s denial that he financed the partnership and
that he was merely a guarantor cannot be sustained
since it was established that he presided over
meetings on matters affecting the operation of the
business. Moreover, his letter (re: 37% commission)
on a stationery of his own business firm, Wilcon
Builders Supply, could not be interpreted otherwise
than that he had a proprietary interest in the
business. Also, if he was indeed a guarantor of future
debts of Tocao, he should have presented
documentary evidence therefor per Article 1403 of
the Civil Code.
 Tocao was also a capitalist partner. She claimed that
she herself financed the business. It was buttressed
by her admission that Belo was her boyfriend and
that the partnership was not their only business
venture together (also established a firm called
"Wiji"). Belo and Tocao merged their respective
capital and infused the amount into the partnership
when in the early stages of the business operation,
they requested West Bend to allow them to "utilize
their banking and trading facilities in Singapore" in
the matter of importation and payment of the
cookware products.
 By the set-up of the business, third persons were
made to believe that a partnership had indeed been
forged between the parties as can be seen by the
letter of Jagler to Meuncheberg, both of West Bend.
 While it is true that the receipt of a percentage of net
profits constitutes only prima facie evidence that the
recipient is a partner in the business, the fact that no
employer-employee relationship was created among
the three is evidenced by the fact that Anay had a
voice in the management of the affairs of the
company, including the selection of people who
would constitute the administrative and sales staff.
Moreover, Tocao admitted that, like her who owned
the company, Anay received only commissions,
transportation and representation allowances and
not a fixed salary. Tocao and Anay also received the
same amount because Tocao treats Anay as an
equal. If indeed Anay was only an employee, it is
difficult to believe that they shall receive the same
income in the business. As an industrial partner,
private respondent had the right to demand for a
formal accounting of the business and to receive her
share in the net profit.
 The fact that the business was operated under the
name of Geminesse Enterprise, a sole
proprietorship, is of no moment. What was registered
with the Bureau of Domestic Trade was merely the
name of that enterprise. The business name was
used only for practical reasons and was utilized as
the common name for Tocao’s various business
activities (distributorship of cookware and water
purifier).
 A ploy to offset the damages awarded to Anay, the
claim regarding the unaccounted stocks proved the
existence of a partnership among them. The best
evidence of the existence of the partnership, which
was not yet terminated (though in the winding up
stage), were the unsold goods and uncollected
receivables.
 Undoubtedly, Tocao unilaterally excluded Anay to
reap for herself and/or for Belo financial gains
resulting from Anay’s efforts to make the business
venture a success.
ON DISSOLUTION:
 A mere falling out or misunderstanding between
partners does not convert the partnership into a
sham organization. The partnership exists until
dissolved under the law. Since the partnership has
no fixed term (a partnership at will) predicated on
their mutual desire and consent, it may be dissolved
by the will of a partner.
 The right to choose with whom a person wishes to
associate himself is the very foundation of the
partnership. Its continued existence is dependent on
the constancy of that mutual resolve, along with each
partner’s capability to give it, and the absence of
cause for dissolution provided by the law itself.
 Any one of the partners may, at his sole pleasure,
dictate a dissolution of the partnership at will. He
must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution
of the partnership.
 The presence of bad faith in the dissolution
(unjustified dissolution by a partner) may held such
partner liable for damages. By the mutual agency
that arises in a partnership, the doctrine of delectus
personae allows the partners to have
the power, although not necessarily the right to
dissolve the partnership.
 In the present case, Anay’s unilateral exclusion from
the partnership is shown by the memo stating that
she was no longer the vice-president for sales. By
that memo, Tocao effected Anay’s own withdrawal
from the partnership. Nevertheless, the partnership
was not terminated and it continued until the winding
up of the business which is not yet undertaken by the
partnership in the present case. This is manifest in
Tocao and Belo’s claim for stocks.
SY VS CA
FACTS:
1) Sy Yong Hu & Sons is a partnership of Sy Yong Hu
and his sons, Jose Sy, Jayme Sy, Marciano Sy, Willie
Sy, Vicente Sy, and Jesus Sy, with Jose Sy as
managing partner.
2) the partnership has valuable assets such as tracts
of lands planted to sugar cane and commercial lots in
the business district of Bacolod City.
3) Sometime in September, 1977, during the lifetime of
all the partners, Keng Sian brought an action (Civil
Case No. 13388) , before the then Court of First
Instance of Negros Occidental, against the partnership
as well as against the individual partners for accounting
of all the properties allegedly owned in common by Sy
Yong Hu and the plaintiff (Keng Sian), and for the
delivery or reconveyance of her one-half (1/2) share in
said properties and in the fruits thereof.
4) Keng Sian averred that she was the common law
wife of partner Sy Yong Hu, that Sy Yong Hu, together
with his children, who were partners in the partnership,
connived to deprive her of her share in the properties
acquired during her cohabitation with Sy Yong Hu, by
diverting such properties to the partnership.
5) In their answer, the defendants, including Sy Yong
Hu himself, countered that Keng Sian is only a house
helper of Sy Yong Hu and his wife, subject properties
are exclusively owned by defendant partnership, and
plaintiff has absolutely no right to or interest therein.
6)during the pendency of said civil case, Marciano Sy
filed a petition for declaratory relief ( SEC Case No.
1648) against partners Vicente Sy, Jesus Sy and
Jayme Sy, praying that he be appointed managing
partner of the partnership, to replace Jose Sy who
died.
7) Answering the petition, Vicente Sy, Jesus Sy and
Jaime Sy, who claim to represent the majority interest
in the partnership, sought the dissolution of the
partnership and the appointment of Vicente Sy as
managing partner.
8) In due time, Hearing Officer Emmanuel Sison came
out with a decision (Sison Decision) dismissing the
petition, dissolving the partnership and naming Jesus
Sy, in lieu of Vicente Sy who had died earlier, as the
managing partner in charge of winding the affairs of the
partnership.
9) The Sison decision was affirmed in toto by the
SEC en banc in a decision (Abello decision)
10) On the basis of the decision of the SEC en banc, a
partial partition of certain partnership assets was
approved.
11) the children of Keng Sian sought to intervene in
SEC Case No. 1648 but their motion to so intervene
was denied.
12) In the meantime, Branch 43 of the Regional Trial
Court of Negros Occidental appointed one Felix Ferrer
as a Special Administrator for the Intestate Estate of Sy
Yong hu in Civil Case No. 13388. Alex Ferrer moved to
intervene in the proceedings, for the partition and
distribution of the partnership assets (SEC Case No.
1648),, on behalf of the respondent Intestate Estate.
13) The motion to intervene filed by Special
Administrator Alex Ferrer on behalf of the respondent
Estate, was denied. With the denial of the motion for
reconsideration, private respondent Intestate Estate of
Sy Yong Hu appealed to the Commission en banc.
14) During the continuation of the proceedings in SEC
Case No. 1648, Hearing Officer Tongco came out with
an Order (Tongco Order) placing the partnership under
a receivership committee, explaining that it is the most
equitable fair and just manner to preserve the assets
of the partnership during the pendency of the civil case
in the Regional Trial Court of Bacolod City.
15) a joint Notice of Appeal to the SEC en banc was
filed by herein petitioners Jayme Sy, Jesus Sy, Estate
of Jose Sy, Estate of Vicente Sy, Heirs of Marciano Sy
and Willie Sy, against the Intervenor.
16) In an order (Lopez Order), the SEC en banc
affirmed the Tongco Order.
17)Petitioners filed a special civil action
for certiorari with the Court of Appeals.
18) the Court of Appeals remanded the case to the
SEC for the formation of a receivership committee, as
envisioned in the Tongco Order.
19) Petitioners fault the Court of Appeals for affirming
the 1989 Decision of the SEC which approved the
appointment of a receivership committee as ordered by
Hearing Officer Felipe Tongco. They theorize that the
1988 Tongco Decision varied the 1982 Abello Decision
affirming the dissolution of the partnership, contrary to
the final and executory tenor of the said judgment. – 1st
contention
20) On the same premise, petitioners aver that the
Order placing the partnership under a receivership
committee was erroneous and tainted with excess of
jurisdiction. – 2nd contention
ISSUE:
WHETHER OR NOT AN ORDER placing the
partnership under a receivership committee suspends
DISSOLUTION
Ruling:
NO. The contentions are untenable.
1st contention
Petitioners fail to recognize the basic distinctions
underlying the principles of dissolution, winding up and
partition or distribution.
The dissolution of a partnership is the change in
the relation of the parties caused by any partner
ceasing to be associated in the carrying on, as might
be distinguished from the winding up, of its
business. Upon its dissolution, the partnership
continues and its legal personality is retained until the
complete winding up of its business culminating in its
termination.
The dissolution of the partnership did not mean
that the juridical entity was immediately terminated and
that the distribution of the assets to its partners should
perfunctorily follow. On the contrary, the dissolution
simply effected a change in the relationship among the
partners. The partnership, although dissolved,
continues to exist until its termination, at which time the
winding up of its affairs should have been completed
and the net partnership assets are partitioned and
distributed to the partners.
The error, therefore, ascribed to the Court of
Appeals is devoid of any sustainable basis. The Abello
Decision though, indeed, final and executory, did not
pose any obstacle to the Hearing Officer to issue
orders not inconsistent therewith. From the time a
dissolution is ordered until the actual termination of the
partnership, the SEC retained jurisdiction to adjudicate
all incidents relative thereto. Thus, the disputed order
placing the partnership under a receivership committee
cannot be said to have varied the final order of
dissolution. Neither did it suspend the dissolution of the
partnership. If at all, it only suspended the partition and
distribution of the partnership assets pending
disposition of (Civil Case No. 13388) on the basis of
the agreement by the parties and under the
circumstances of the case. It bears stressing that, like
the appointment of a manager in charge of the winding
up of the affairs of the partnership, said appointment of
a receiver during the pendency of the dissolution is
interlocutory in nature, well within the jurisdiction of the
SEC.
Furthermore, having agreed with the respondents
not to dispose of the partnership assets, petitioners
effectively consented to the suspension of the winding
up or, more specifically, the partition and distribution of
subject assets. Petitioners are now estopped from
questioning the order of the Hearing Officer issued in
accordance with the said agreement.
2nd contention:
Receivership, which is admittedly a harsh
remedy, should be granted with extreme
caution. Sound bases therefor must appear on record,
and there should be a clear showing of its
necessity. The need for a receivership in the case
under consideration can be gleaned from the
aforecited disquisition by the Court of Appeals finding
that the properties of the partnership were in danger of
being damaged or lost on account of certain acts of the
appointed manager in liquidation.
The dispositions of certain properties by the said
manager, on the basis of an order of partial partition,
which was not yet final and executory, indicated that
the feared irreparable injury to the properties of the
partnership might happen again. So also, the failure of
the manager in liquidation to submit to the SEC an
accounting of all the partnership assets justified the
SEC in placing the subject assets under receivership.
Moreover, it has been held by this Court that an
order placing the partnership under receivership so as
to wind up its affairs in an orderly manner and to protect
the interest of the plaintiff (herein private respondent)
was not tainted with grave abuse of discretion.
Primelink v. Lazatin-Magat
FACTS:
 Primelink Properties and Development
Corporation, a real estate developer, represented
by its President and CEO, Rafaelito W. Lopez.
 Ma. Clara T. Lazatin-Magat and her brothers, Jose
Serafin T. Lazatin, Jaime T. Lazatin and Jose
Marcos T. Lazatin, are co-owners of two adjoining
parcels of land, with a combined area of 30,000
sqm, located in Tagaytay City.
 In 1994, Primelink and the Lazatins entered
into a Joint Venture Agreement for the
development of the said property into a residential
subdivision to be known as “Tagaytay Garden
Villas.”
 Under the JVA, the Lazatins obliged themselves to
contribute the two parcels of land. While, Primelink
undertook to contribute money, labor, personnel,
machineries, equipment, contractor’s pool,
marketing activities, managerial expertise and
other needed resources to develop the property
and construct the units for sale to the public.
 The parties agreed that they shall be entitled to
draw allowances/advances as follows:
o First two years, the parties can draw not
exceeding 20% of the revenue, on the
basis of 60% for the developer and 40%
for the landowners.
o After two years, they are entitled 60-40 of
the total net revenue.
 They agreed that any conflict with regard the
agreement shall be referred to Voluntary
Arbitration.
 They agreed to subject the title over the subject
property to an escrow agreement with the China
Bank Corporation.
 However, Primelink failed to immediately secure a
Development Permit from Tagaytay City and was
issued a permit only on October 12, 1995.
 On April 10, 1997, the Lazatins demanded that
Primelink comply with its obligations under the
JVA.
 On October 22, 1997, the Lazatins rescinded the
JVA.
 On January 19, 1998, the Lazatins filed with the
RTC, a complaint for rescission with TRO.
 Plaintiffs alleged that despite the lapse of
almost 4 years the project had not yet been
completed and defendants failed to deliver
the shares which would amount to not less
than P40,000,000.
 Defendants opposed that plaintiff failed to refer
their complaint to Voluntary Arbitrator before filing
their complaint in the RTC and prayed for the
dismissal of the complaint.
 Primelink was declared in default for failing to file
an answer and for asking multiple motions for
extension.
 The RTC rendered judgment in favor of the
plaintiffs ordering the rescission of the JVA and the
 defendants to return possession including all
improvements.
 The evidence show that the project earned a net
income of about P2,603,810.64 but was reduced
by the defendants to P1,954,216.39 and before
the plaintiffs could get hold of their share, the
defendants declared a net loss of P5,122,906.39.
 The CA affirmed.
 Primelink contend that:
o Before the rescission, the the property
had already been substantially
developed.
o Under Arts. 1384 and 1385, rescission
shall be only to the extent necessary to
cover the damages caused and it created
the obligation to return the things which
were not object of the contract.
o Their default would not defeat their claim
for reimbursement.
 Lazatins contend that Primelink is not entitled to
rescission for the improvements because it was
the latter that enriched itself at the expense of the
former.
ISSUE:
1. Whether there was fraud on the part of
Primelink.
2. Whether Primelink is entitled to
reimbursement for the value of the
improvements.
HELD:
1. YES.
The LAZATINs were able to establish fraud
on the part of PRIMELINK which, in the words of the
court a quo, was a pattern of what appears to be a
scheme or plot to reduce and eventually blot out the
net incomes generated from sales of housing units by
the defendants.
Under Article 1838 of the Civil Code, where
the partnership contract is rescinded on the ground of
the fraud or misrepresentation of one of the parties
thereto, the party entitled to rescind is, without
prejudice to any other right is entitled to a lien on, or
right of retention of, the surplus of the partnership
property after satisfying the partnership liabilities to
third persons for any sum of money paid by him for the
purchase of an interest in the partnership and for any
capital or advance contributed by him.
2. NO.
In this case, Primelink and respondents
entered into a joint venture as evidenced by their JVA
which, under the Court’s ruling in Aurbach, is a form of
partnership, and as such is to be governed by the laws
on partnership. When the RTC rescinded the JVA on
complaint of respondents based on the evidence on
record that petitioners willfully and persistently
committed a breach of the JVA, the court thereby
dissolved/cancelled the partnership.
With the rescission of the JVA on account
of petitioners’ fraudulent acts, all authority of any
partner to act for the partnership is terminated
except so far as may be necessary to wind up the
partnership affairs or to complete transactions
begun but not yet finished.
On dissolution, the partnership is not
terminated but continues until the winding up of
partnership affairs is completed. Winding up
means the administration of the assets of the
partnership for the purpose of terminating the
business and discharging the obligations of the
partnership.
The transfer of the possession of the
parcels of land and the improvements thereon to
respondents was only for a specific purpose: the
winding up of partnership affairs, and the partition
and distribution of the net partnership assets as
provided by law.
After all, Article 1836 of the New Civil Code
provides that unless otherwise agreed by the parties in
their JVA, respondents have the right to wind up the
partnership affairs:
Art. 1836. Unless otherwise agreed, the partners who
have not wrongfully dissolved the partnership or the
legal representative of the last surviving partner, not
insolvent, has the right to wind up the partnership
affairs, provided, however, that any partner, his legal
representative or his assignee, upon cause shown,
may obtain winding up by the court.
Also, although respondents acquired
possession of the lands and the improvements
thereon, the said lands and improvements
remained partnership property, subject to the
rights and obligations of the parties, inter se, of the
creditors and of third parties under Articles 1837 and
1838 of the New Civil Code, and subject to the outcome
of the settlement of the accounts between the parties
as provided in Article 1839 of the New Civil Code,
absent any agreement of the parties in their JVA to the
contrary. Until the partnership accounts are
determined, it cannot be ascertained how much any of
the parties is entitled to, if at all.
It was premature for petitioner Primelink to be
demanding that it be indemnified for the value of the
improvements on the parcels of land owned by the joint
venture/partnership. Notably, the JVA of the parties
does not contain any provision designating any party
to wind up the affairs of the partnership.
Thus, under Article 1837 of the New Civil
Code, the rights of the parties when dissolution is
caused in contravention of the partnership agreement
are as follows:
(1) Each partner who has not caused dissolution
wrongfully shall have:
(a) All the rights specified in the first paragraph of this
article, and
(b) The right, as against each partner who has caused
the dissolution wrongfully, to damages for breach of the
agreement.
(2) The partners who have not caused the dissolution
wrongfully, if they all desire to continue the business in
the same name either by themselves or jointly with
others, may do so, during the agreed term for the
partnership and for that purpose may possess the
partnership property, provided they secure the
payment by bond approved by the court, or pay to any
partner who has caused the dissolution wrongfully, the
value of his interest in the partnership at the
dissolution, less any damages recoverable under the
second paragraph, No. 1(b) of this article, and in like
manner indemnify him against all present or future
partnership liabilities.
(3) A partner who has caused the dissolution
wrongfully shall have:
(a) If the business is not continued under the provisions
of the second paragraph, No. 2, all the rights of a
partner under the first paragraph, subject to liability for
damages in the second paragraph, No. 1(b), of this
article.
(b) If the business is continued under the second
paragraph, No. 2, of this article, the right as against his
co-partners and all claiming through them in respect of
their interests in the partnership, to have the value of
his interest in the partnership, less any damage caused
to his co-partners by the dissolution, ascertained and
paid to him in cash, or the payment secured by a bond
approved by the court, and to be released from all
existing liabilities of the partnership; but in ascertaining
the value of the partner’s interest the value of the good-
will of the business shall not be considered.
NOTE: Read also Arts. 1838 & 1839.
MAXIMO GUIDOTE, PLAINTIFF AND APPELLANT,
VS. ROMANA BORJA, AS ADMINISTRATRIX OF
THE ESTATE OF NARCISO SANTOS, DECEASED,
DEFENDANT AND APPELLEE.
Facts:
On March 4,1921 Guidote brought an action against
Borja, the administratrix of the estate of Narciso
Santos, to recover P9,534.14 which allegedly was due
to him as net profits of the partnership "Taller
Sinukuan" in which Santos was the capitalist partner
while Guidote was the industrial partner. Borja then
admitted the existence of the partnership and in a
cross-complaint prayed that Guidote be ordered to
render an accounting of the partnership.
Guidote called several witnesses and introduced a so-
called accounting and a mass of documentary
evidence consisting of books, bills, and alleged
vouchers, which documentary evidence was so
hopelessly and inextricably confused that the court, as
stated in its decision, could not consider it of much
probative value. However, the court ordered the Borja
be absolved from the action and to render an account
thereof to the administratrix of Santos's estate since
Guidote failed to liquidate the affairs of the partnership.
Borja presented an account and liquidation prepared
by a public accountant, Santiago A. Lindaya, showing
a balance of P26,020.89 in her favor. To contradict the
conclusions of Lindaya and Santiago, Guidote
presented Pio Gaudier, the bookeeper.
The trial court found the conclusions of Lindaya and
Santiago as just and correct - hence ordering Guidote
to pay Borja the P26,020.89 with legal interest.
Issue:
WON the court erred in ruling in favor of Borja and
ordering Guidote to pay her P26,020.89
Ruling:
No. There may be some merit in Guidote’s contention
that the dismissal of his complaint was premature. The
better practice would have been to let the complaint
stand until the result of the liquidation of the partnership
affairs was known. But under the circumstances, no
harm was done by the dismissal of Guidote’s
complaint.
However, in Wahl vs. Donaldson Sim & Co. death of
one of the partners dissolves the partnership, but that
the liquidation of its affairs is by law entrusted, not to
the executors of the deceased partner, but to the
surviving partners or the liquidators appointed by them.
In equity surviving partners are treated as trustees of
the representatives of the deceased partner, in regard
to the interest of the deceased partner in the firm. As a
consequence of this trusteeship, surviving partners are
held in their dealings with the firm assets and the
representatives of the deceased to that nicety of
dealing and that strictness of accountability required of
and incident to the position of one occupying a
confidential relation. It is the duty of surviving partners
to render an account of the performance of their trust
to the personal representatives of the deceased
partner, and to pay over to them the share of such the first time. Petitioner was informed by Willy
deceased member in the surplus of firm property, Co that the latter had bought the business
whether it consists of real or personal assets. from the original partners and that it was for
him to decide whether or not he was
responsible for the obligations of the old
BENJAMIN YU vs. NATIONAL LABOR partnership, including petitioner's unpaid
RELATIONS COMMISSION and JADE MOUNTAIN salaries. Petitioner was in fact not allowed to
PRODUCTS COMPANY LIMITED, WILLY CO, et. Al. work anymore in the Jade Mountain business
enterprise. His unpaid salaries remained
unpaid.
FACTS:
 On 21 December 1988. Benjamin Yu filed a
 Jade Mountain Products Company Limited complaint for illegal dismissal and recovery of
was a partnership originally organized with unpaid salaries against Jade Mountain and
Lea Bendal and Rhodora Bendal as general Willy Co and other defendants.
partners and Chin Shian Jeng, Chen Ho-Fu
and Yu Chang, all citizens of the Republic of
China (Taiwan), as limited partners. The LA: petitioner had been illegally
partnership business consisted of exploiting a dismissed
marble deposit found on land owned by the
Sps. Ricardo and Guillerma Cruz, situated in
NLRC: Reversed; The NLRC
Bulacan Province, under a Memorandum
Agreement with the Cruz spouses. 1 The held that a new partnership
partnership had its main office in Makati, consisting of Mr. Willy Co and
Metropolitan Manila. Mr. Emmanuel Zapanta had
bought the Jade Mountain
 Benjamin Yu was hired by virtue of a business, that the new
Partnership Resolution, as an Assistant partnership had not retained
General Manager. Yu had a monthly salary of petitioner Yu in his original
P4,000.00. However, he actually received
position as Assistant General
only half of his stipulated monthly salary,
since he had accepted the promise of the Manager, and that there was no
partners that the balance would be paid when law requiring the new
the firm shall have secured additional partnership to absorb the
operating funds from abroad. employees of the old
partnership. Benjamin Yu,
 Sometime in 1988, without the knowledge of therefore, had not been illegally
Benjamin Yu, the general partners Lea dismissed by the new
Bendal and Rhodora Bendal sold and
partnership which had simply
transferred their interests in the partnership to
private respondent Willy Co and to one declined to retain him in his
Emmanuel Zapanta. Mr. Yu Chang, a limited former managerial position or
partner, also sold and transferred his interest any other position.
in the partnership to Willy Co who thereafter
acquired the great bulk of the partnership
interest.
ISSUES:
 The partnership continued to use the old firm
name of Jade Mountain, though they moved 1. Whether the partnership which had hired
the firm's main office from Makati to petitioner Yu as Assistant General
Mandaluyong. The actual operations of the Manager had been extinguished and
business enterprise continued as before. All replaced by a new partnerships
the employees of the partnership continued composed of Willy Co and Emmanuel
working in the business, all, save petitioner Zapanta; and
Benjamin Yu as it turned out.

 On 16 November 1987, having learned of the
transfer of the firm's main office from Makati
to Mandaluyong, petitioner Benjamin Yu
reported to the Mandaluyong office for work
and there met private respondent Willy Co for
2. If indeed a new partnership had come into
existence, whether petitioner Yu could
nonetheless assert his rights under his
 employment contract as against the new
partnership.
RULING:
1. YES.
The legal effect of the changes in the
membership of the partnership was the
dissolution of the old partnership which had
hired petitioner in 1984 and the emergence of
a new firm composed of Willy Co and
Emmanuel Zapanta in 1987.
The applicable law is found in the Civil Code
provisions relating to partnerships. Article
1828 of the Civil Code provides as follows:
Art. 1828. The dissolution of a
partnership is the change in the
relation of the partners caused by any
partner ceasing to be associated in the
carrying on as distinguished from the
winding up of the business.
Article 1830 of the same Code must also be
noted:
Art. 1830. Dissolution is caused:
(1) without violation of the agreement
between the partners;
(b) by the express will of any partner,
who must act in good faith, when no
definite term or particular undertaking
is specified;
(2) in contravention of the agreement
between the partners, where the
circumstances do not permit a
dissolution under any other provision
of this article, by the express will of any
partner at any time;
The acquisition of 82% of the partnership
interest by new partners, coupled with the
retirement or withdrawal of the partners who
had originally owned such 82% interest, was
enough to constitute a new partnership.
The occurrence of events which precipitate
the legal consequence of dissolution of a
partnership do not, however, automatically
result in the termination of the legal
personality of the old partnership. Article 1829
of the Civil Code states that:
[o]n dissolution the partnership is not
terminated, but continues until the
winding up of partnership affairs is
completed.
In the ordinary course of events, the legal
personality of the expiring partnership persists
for the limited purpose of winding up and
closing of the affairs of the partnership. In the
case at bar, it is important to underscore the
fact that the business of the old partnership
was simply continued by the new
partners, without the old partnership
undergoing the procedures relating to
dissolution and winding up of its business
affairs. In other words, the new partnership
simply took over the business enterprise
owned by the preceeding partnership, and
continued using the old name of Jade
Mountain Products Company Limited, without
winding up the business affairs of the old
partnership, paying off its debts, liquidating
and distributing its net assets, and then re-
assembling the said assets or most of them
and opening a new business enterprise.
There were, no doubt, powerful tax
considerations which underlay such an
informal approach to business on the part of
the retiring and the incoming partners. It is
not, however, necessary to inquire into such
matters.
2. YES.
Under Article 1840, creditors of the old Jade
Mountain are also creditors of the new Jade
Mountain which continued the business of the
old one without liquidation of the partnership
affairs. Indeed, a creditor of the old Jade
Mountain, like petitioner Benjamin Yu in
respect of his claim for unpaid wages, is
entitled to priority vis-a-vis any claim of any
retired or previous partner insofar as such
retired partner's interest in the dissolved
partnership is concerned.
It is at the same time also evident to the Court
that the new partnership was entitled to
appoint and hire a new general or assistant
general manager to run the affairs of the
business enterprise take over. An assistant
general manager belongs to the most senior
ranks of management and a new partnership
is entitled to appoint a top manager of its own
choice and confidence. The non-retention of
Benjamin Yu as Assistant General Manager
did not therefore constitute unlawful
termination, or termination without just or
authorized cause. We think that the precise
authorized cause for termination in the case
at bar was redundancy. 10 The new
partnership had its own new General
Manager, apparently Mr. Willy Co, the
principal new owner himself, who personally
ran the business of Jade Mountain.